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HCM CITY — Last week’s licensing of two American insurance companies is a strong sign of the Vietnamese Government’s intention to open up its fledgling insurance market, according to an official from the finance ministry.

With the addition of the two companies, New York Life and ACE, the total number of American life insurance outlets doing business in Viet Nam now stands at three.

Le Quang Binh, head of the finance ministry’s Insurance Department, said the insurance market has posted an average annual growth of 29-30 per cent for the last few years, opening opportunities for foreign insurance companies to do business in Viet Nam.

He said the presence of foreign insurance firms will force domestic players to restructure their managerial mechanisms and offer new insurance policies to attract customers.

In the first half of this year, the national insurance industry earned a turnover of VND8 trillion (US$506 million), an increase of 18 per cent compared with the same period last year.

The insurance market in recent years has played an increasing role in the country’s gross domestic product (GDP), accounting for 0.37 per cent of GDP in 1995. Last year, the industry’s turnover rose to VND14.23 trillion, accounting for 2 per cent of the country’s GDP.

By the end of this year, the industry’s turnover is expected to hit VND17 trillion, accounting for 2.5 per cent of GDP.

Insurance companies have also contributed to mobilising domestic capital to meet the increasing demand for national economic development and expediting the country’s integration into the global economy.

Over the last six months, the Insurance Department has authorized five foreign insurance companies to open representative offices and offered operation licenses to three entirely foreign invested life insurance companies and one joint stock insurance company.

Many overseas insurance rivals have flocked to Viet Nam since the early 1990s. In 1999, Canadian Manulife became the first 100 per cent foreign-invested insurance company to operate in Viet Nam. The UK’s Prudential and America’s AIA followed.

Over the last decade, 28 insurance companies have been established in the form of State-run, joint stock, joint ventures and wholly foreign-invested firms.

In addition, the presence of 30 representative offices for foreign insurance companies has helped improve the investment environment and strengthen the confidence of foreign investors in Viet Nam, Binh said.